Substitute Senate Bill No. 143
          Substitute Senate Bill No. 143

              PUBLIC ACT NO. 97-181


AN   ACT   CONCERNING   EQUITY   IN   CONSTRUCTION
CONTRACTS.


    Be it enacted  by  the  Senate  and  House  of
Representatives in General Assembly convened:
    Section 1. (NEW)  As  used in sections 1 to 5,
inclusive,  of  this   act,   unless  the  context
otherwise requires:
    (1) "Owner" means any individual, corporation,
partnership,    limited    partnership,    limited
liability company or other business entity that is
the owner of real property upon which a commercial
or  mixed-use  building  is  to  be  or  is  being
constructed pursuant to a construction contract.
    (2)  "Completion"  means  the  point  in  time
during  the  construction   of   a  commercial  or
mixed-use  building  pursuant  to  a  construction
contract  when  a  certificate  of  occupancy  may
lawfully be issued by a local building official.
    (3) "Retainer" means  any  amount  owed  by an
owner to a general contractor and held back by the
owner pursuant to  the  terms  of  a  construction
contract.
    (4)  "Construction  contract"   or  "contract"
means any contract  for  the  construction  of any
commercial or mixed  use  building,  including any
improvements to real  property that are associated
with such construction,  having  a  total  cost or
estimated  cost  of  two  hundred  fifty  thousand
dollars or more,  entered into in this state on or
after the effective  date  of  this act between an
owner  and a  general  contractor,  or  between  a
general   contractor  and   a   subcontractor   or
subcontractors, or between a subcontractor and any
other  subcontractor, but  does  not  include  any
public works or  other  building  contract entered
into with the  state, the United States, any other
state, and any  municipality  or  other  political
subdivision of the state or any other state.
    Sec. 2. (NEW)  (a)  Each construction contract
shall contain the following provisions:
    (1) A requirement  that any dispute concerning
any  payment owed  under  the  contract  shall  be
submitted to arbitration  not  later  than  thirty
days after the date such payment was due under the
contract, unless, before  the  expiration  of such
thirty-day period, such dispute is resolved by the
mutual agreement of  the  parties  or  the parties
mutually agree to  bring  such  dispute  before  a
court of competent jurisdiction. In the absence of
any such mutual  agreement,  such dispute shall be
submitted  to  arbitration   in   accordance  with
applicable  law  and  the  rules  of  any  dispute
resolution  entity agreed  upon  by  the  parties,
except that if  the  parties  cannot  agree upon a
dispute resolution entity, the applicable rules of
the American Arbitration  Association shall apply.
Prior to submitting  a dispute to arbitration, the
parties  may,  by  mutual  agreement,  submit  the
dispute to mediation.  In  the event of mediation,
the rules of  the American Arbitration Association
shall apply to such mediation.
    (2) A requirement  that  any  arbitration fees
and  reasonable  attorneys'   fees   incurred   in
connection  with  any   arbitration   required  by
subdivision (1) of  this  subsection shall be paid
as directed by the arbitrator or arbitrators.
    (3)   A  requirement   or   requirements,   as
applicable, that (A)  the owner shall pay interest
in the amount  of  ten  per  cent  per year on any
amount awarded by the arbitrator or arbitrators to
the general contractor; (B) the general contractor
shall pay interest  in  the amount of ten per cent
per year on  any  amount awarded by the arbitrator
or arbitrators to  the  subcontractor;  or (C) the
subcontractor shall pay  interest in the amount of
ten per cent per year on any amount awarded by the
arbitrator   or   arbitrators    to    any   other
subcontractor. Such interest shall accrue from the
date  the  amount  that  is  the  subject  of  the
arbitration award was  due  to  be  paid under the
contract.
    (4)   A  requirement   or   requirements,   as
applicable, that (A)  the general contractor shall
make final payment  to the subcontractor, for work
satisfactorily performed under  the contract, by a
specific time mutually  agreed  to  by the general
contractor and the  subcontractor,  but  not later
than  sixty days  after  the  date  on  which  the
general contractor receives final payment from the
owner; or (B)  the  subcontractor shall make final
payment  to  any  other  subcontractor,  for  work
satisfactorily performed under  the contract, by a
specific   time  mutually   agreed   to   by   the
subcontractor and such  other  subcontractor,  but
not later than  sixty days after the date on which
the former subcontractor  receives  final  payment
from the general contractor.
    (b) No construction  contract  may provide for
any retainer (1)  in  an  amount that exceeds five
per  cent  of  the  amount  owed  to  the  general
contractor by the  owner  under  the contract, and
(2) which is  held  for  a  period exceeding sixty
days  following  completion  of  all  work  to  be
performed under the contract.
    (c) No surety  shall  be  obligated to pay any
fees or interest  pursuant to subdivisions (2) and
(3) of subsection (a) of this section.
    (d) Either party  to  a  construction contract
arbitration  pursuant  to   subdivision   (1)   of
subsection   (a)  of   this   section   may   make
application to the superior court for the judicial
district in which  one  of  the parties resides or
has his principal  place  of business for an order
confirming, vacating, modifying  or correcting any
award rendered in  such arbitration, in accordance
with  the  provisions   of   this  subsection  and
sections 52-417, 52-418,  52-419 and 52-420 of the
general statutes. A  review  of  such  application
shall be confined to the record of the proceedings
before the arbitrator  or  arbitrators.  The court
shall conduct a de novo review of the questions of
law raised in  the application. In addition to the
grounds set forth in sections 52-418 and 52-419 of
the general statutes,  the  court  shall  consider
questions of fact  raised  in  the application. In
reviewing such questions  of fact, the court shall
uphold the award  unless  it  determines  that the
factual findings of  the arbitrator or arbitrators
are not supported  by  substantial evidence in the
record and that  the  substantial  rights  of  the
party   making   such    application   have   been
prejudiced. If the  arbitrator or arbitrators fail
to state findings or reasons for the award, or the
stated findings or  reasons  are  inadequate,  the
court shall search the record to determine whether
a basis exists  to  uphold the award. If the court
determines that the  party making such application
has acted without good cause in bringing an appeal
of the award,  the  court,  in its discretion, may
grant costs and  reasonable attorney's fees to the
prevailing party.
    Sec. 3. (NEW)  (a)  If any payment required to
be made by  an  owner  to  a general contractor in
connection with any  construction  contract is not
made within fifteen  days of a written request for
such payment made by the general contractor to the
owner, which request  is made on or after the date
such  payment is  due  under  such  contract,  the
general contractor may  cease  work and remove all
materials located at  the work site that have been
furnished by the  general  contractor and have not
been utilized, installed or otherwise incorporated
in the project and have not been previously billed
for by the  general  contractor or paid for by the
owner.  In  taking   such   action,   the  general
contractor shall not  be  liable  for  any damages
pursuant  to  the  contract  between  the  general
contractor and the  owner  for reasons of delay or
failure  to  comply  with  any  work  schedule  or
deadlines provided in  such contract to the extent
such  delay  or  failure  to  comply  is  directly
related to such  action.  Any  general  contractor
taking such action shall return all such materials
and resume work  within  fifteen days of receiving
full payment from  the owner of all amounts due to
date under any such contract.
    (b) If any  payment  required  to be made by a
general   contractor   to   a   subcontractor   in
connection with any  construction  contract is not
made within fifteen  days of a written request for
such payment made  by  the  subcontractor  to  the
general contractor, which  request  is  made on or
after the date  such  payment  is  due  under such
contract, the subcontractor  may  cease  work  and
remove all materials located at the work site that
have been furnished  by the subcontractor and have
not   been  utilized,   installed   or   otherwise
incorporated in the  project  and  have  not  been
previously billed for by the subcontractor or paid
for by the  general  contractor.  In  taking  such
action, the subcontractor  shall not be liable for
any damages pursuant  to  the contract between the
subcontractor  and  the   general  contractor  for
reasons of delay  or  failure  to  comply with any
work  schedule  or   deadlines  provided  in  such
contract to the  extent  such  delay or failure to
comply is directly  related  to  such  action. Any
subcontractor taking such  action shall return all
such materials and resume work within fifteen days
of  receiving  full   payment   from  the  general
contractor of all  amounts  due  to date under any
such contract.
    Sec. 4. (NEW) For purposes of sections 1 to 3,
inclusive, and section  6 of this act, any payment
made by an  owner  directly  to a subcontractor of
any amount owed to such subcontractor by a general
contractor under a  construction  contract between
the subcontractor and the general contractor shall
be deemed to  have  been paid by the owner to such
general contractor under any construction contract
between  the general  contractor  and  the  owner,
provided: (1) Such  amount  shall  not  exceed the
amount required to be paid to the subcontractor by
the  general  contractor  under  the  construction
contract between the subcontractor and the general
contractor; (2) such  amount  was  not paid by the
general contractor to the subcontractor within the
time required by the construction contract between
the subcontractor and  the general contractor; and
(3) the owner  shall provide written notice to the
general contractor that  the  owner is making such
payment to the subcontractor.
    Sec. 5. (NEW)  (a)  No act or agreement of the
parties  to  a   construction   contract  nor  any
agreement or statement  contained in such contract
shall constitute a  valid waiver of the provisions
of sections 1 to 4, inclusive, of this act.
    (b) If any  provision  or clause of sections 1
to 5, inclusive, of this act or the application of
such  provision  or   clause   to  any  person  or
circumstance  is  declared   to   be   invalid  or
unenforceable   by   a    court    of    competent
jurisdiction, the remainder  of  sections  1 to 5,
inclusive, of this act and the application of such
provision or clause  to  persons  or circumstances
other than those  to  which  it is held invalid or
unenforceable shall not  be  affected, and to this
end the provisions  of sections 1 to 5, inclusive,
of this act are severable.
    Sec. 6. (NEW)  Notwithstanding any special act
or  local  ordinance,   no  final  certificate  of
occupancy shall be  issued  by  a  local  building
official for any commercial or mixed-use building,
for which a  building permit is issued on or after
the effective date  of  this  act, if the building
official has received  a written notice of dispute
stating that money  is  owed  by  an owner or by a
general   contractor   for   work   performed   in
connection  with  a   construction   contract,  as
defined in section  1 of this act, and that all or
part  of  such  money  owed  remains  unpaid.  The
building   official   shall   issue   such   final
certificate, if otherwise  eligible  for issuance,
upon receipt of:  (1) Written notice signed by the
parties to the  dispute  stating  that  an  amount
equal to the  amount claimed by the party owed has
been placed in  an interest-bearing escrow account
in a bank  in this state by the party obligated to
pay; (2) a  copy  of  a  court  order  or decision
concerning the dispute;  (3) written notice signed
by the parties  to  the  dispute  stating that the
dispute  has  been  submitted  to  arbitration  in
accordance with subdivision  (1) of subsection (a)
of section 2  of this act; (4) an affidavit signed
by one of  the  parties  to the dispute certifying
under penalties of  perjury  that  the dispute has
been submitted to  arbitration  in accordance with
subdivision (1) of  subsection (a) of section 2 of
this act; (5) written notice signed by the parties
to  the  dispute  agreeing  that  the  certificate
should issue notwithstanding  the  dispute; or (6)
if the owner  is  a  public  service  company,  as
defined in section  16-1  of the general statutes,
or a subsidiary  or  affiliate of a public service
company, certification from  the  Secretary of the
State pursuant to  section  16-230  of the general
statutes that the  paid-in  capital and surplus of
such public service  company is not less than five
hundred thousand dollars.  Nothing in this section
shall be construed  to impose any liability on any
municipality or any  building official as a result
of  any action  taken  or  not  taken  under  this
section  or  to   prohibit  the  issuance  of  any
temporary certificate of occupancy allowed by law.
    Sec. 7. Section  49-34 of the general statutes
is repealed and  the  following  is substituted in
lieu thereof:
    A mechanic's lien  is  not  valid,  unless the
person performing the  services  or furnishing the
materials, (1) within  [ninety] ONE HUNDRED TWENTY
days after he has ceased to do so, lodges with the
town clerk of  the town in which the building, lot
or plot of  land  is  situated  a  certificate  in
writing, which shall be recorded by the town clerk
with deeds of  land,  (A) describing the premises,
the amount claimed  as a lien thereon, the name or
names of the person against whom the lien is being
filed and the  date  of  the  commencement  of the
performance   of   services   or   furnishing   of
materials, (B) stating  that the amount claimed is
justly  due,  as   nearly   as  the  same  can  be
ascertained, and (C)  subscribed  and  sworn to by
the claimant, and  (2)  within  the  same time, or
prior to the  lodging  of  the certificate but not
later  than  thirty   days   after   lodging   the
certificate, serves a  true  and  attested copy of
the certificate upon  the  owner  of the building,
lot or plot  of  land  in  the  same  manner as is
provided for the  service of the notice in section
49-35.

Vetoed June 26, 1997